Budget Formulation

The budget for the upcoming budget period is established by the executive. Government ministries, usually led by the Ministry of Finance, are responsible for formulating the budget plan in a process that involves several steps of negotiations among government agencies. Corruption risks increase when individual discretion to set aside funds for later misappropriation is high. Funding requests put forward by the spending agencies at “the bottom” of the government administration pyramid will normally exceed the funds available to be shared. The allocation of the funds depends on political priorities set and negotiations done at “the top” of the government. Political and executive decision-making power is, therefore, always also the power to control and direct the allocation of funds. Where systems of checks and balances are weak and policy making is strongly influenced by lobbying and state-capture, there is a higher risk for corruption in the budget formulation stage. The high level of complexity and technical nature of this process limit opportunities for public monitoring and oversight.  

At this stage of the budget process, approaches for reducing corruption include:

Strengthening overall governance processes

The chances for the budget being allocated to serve the interests of only a few top-level individuals can be reduced through clearly communicated budget “envelopes” (aggregated amounts for spending units), sufficient time and proper procedures for government negotiations, and a stable system of governance with clearly formulated and balanced powers for each involved actor.

Multi-year budgets and programme-based budgeting

Multi-year budgets aim to ensure that the budget reflects political priorities and government strategies over a perspective of many years and also aim to avoid spending pressures at the end of a fiscal year. Programme-based budgets link allocated funds to measurable results. Both measures are assumed to make it easier to hold public officials accountable and reduce opportunities for corruption, wasteful spending and lax observation of spending approval rules. To be effective, this requires reliable control mechanisms to counterweight the greater levels of managerial discretion which are inherent for multi-year and programme-based budgeting.

Provisions for more transparency and public scrutiny

The budget is a bulky document which often reduces public service deliverables and other government activity to a set of codes and numbers. This makes it difficult for the public (and in some case for parliamentarians) to understand to what extent the budget meets policy objectives. The preparation and publication of easy-to-understand presentations of the budget in “plain language” in so-called citizen’s budgets is a tool to enhance transparency and possibilities for public scrutiny, and is a measure that is gaining popularity and acceptance.

Participatory budgeting

Participatory budgeting has also been used as a tool to enhance transparency and accountability by providing citizens with an opportunity to participate in the budget formulation stage. This approach has been successfully applied in a number of countries at the local level and has also shown positive results in the preparation of the national budget in countries like the Philippines, for example.

Good practices: the Philippines example

The Philippines was granted the Gold Open Government Award for grassroots participatory budgeting (GPB) in the inaugural Open Government Partnership (OGP) Awards on 24 September 2014 at the United Nations headquarters in New York City. The Philippines was recognised for its outstanding efforts to deepen citizen engagement in the budget process.  

GPB engages local communities, CSOs and other stakeholders to work with city and municipal governments in proposing projects to be included in the national budget. From its pilot implementation in 2012, GPB has now expanded to 1,590 cities and municipalities and has resulted in a larger allocation of 21 billion Philippine peso (US$470 million) for 16,000 locally-identified projects to be included in the 2015 national budget.  

Source: http://www.gov.ph/2014/09/25/p...

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